PFCE will become an 80%-owned subsidiary of BHB; and

Transcription

1 BOUSTEAD HOLDINGS BERHAD ( BHB OR COMPANY ) ACQUISITION OF 8,000,000 ORDINARY SHARES OF RM1.00 EACH ( SHARES ) IN PFC ENGINEERING SDN BHD ("PFCE") REPRESENTING 80% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF PFCE FOR A TOTAL CASH CONSIDERATION OF RM20,000,000 ( ACQUISITION ) 1. INTRODUCTION The Board of Directors of BHB ( Board ) wishes to announce that the Company has on 6 August 2014, entered into a conditional shares sale agreement dated 6 August 2014 ( SSA ) with the shareholders of PFCE ( Vendors ) in relation to the Acquisition. Upon completion of the SSA: PFCE will become an 80%-owned subsidiary of BHB; and the subsidiaries of PFCE (as set out in Section 1, Appendix I of this announcement) will become the indirect subsidiaries of BHB. 2. DETAILS OF THE ACQUISITION The Acquisition will involve the acquisition of 8,000,000 Shares in PFCE ( Sale Shares ), representing 80% of the issued and paid-up share capital of PFCE for a total cash consideration of RM20,000,000 ( Purchase Consideration ). PFCE will become an 80%-owned subsidiary of BHB upon completion of the Acquisition, while the remaining 20% equity interest in PFCE will continue to be held by the one of Vendors, i.e. Dato Abu Talib bin Mohamed. The table below sets out the following: shareholdings of PFCE before and after the Acquisition; and Purchase Consideration to be received by each of the Vendors. Before the Acquisition After the Acquisition Amount of No. of Shares held No. of Shares held Purchase Consideration Name in PFCE % in PFCE % to be received BHB - - 8,000, Dato' Abu Talib bin Mohamed 8,000, ,000, RM15,000,000 Muammar Gadaffi bin 2,000, RM5,000,000 Abu Talib Total 10,000, ,000, RM20,000,000 The Acquisition will be funded by the internally generated funds of BHB and/or its subsidiaries ( BHB Group ). 1

2 2.1 Information on PFCE PFCE was incorporated in Malaysia as a private limited company under the Companies Act 1965 on 28 June As at the date of this announcement, PFCE has an authorised share capital of RM100 million and an issued and paid-up share capital of RM10 million comprising 10,000,000 Shares. PFCE and its subsidiaries ( PFCE Group ) is an integrated engineering and maintenance services provider for the oil and gas industry, principally involved in the provision of project engineering services specialising in engineering, procurement, construction and commissioning services, facilities maintenance services and trading of oil and gas industry-related mechanical parts, equipment, tools and materials, for both onshore and offshore facilities. Currently, PFCE Group s services are mainly catered for the local market. Further information on PFCE is set out in Appendix I of this announcement. 2.2 Information on the Vendors Dato' Abu Talib bin Mohamed Dato Abu Talib, a Malaysian, aged 65, is the Group Executive Chairman of PFCE and was appointed to the Board of Directors of PFCE on 7 November He is a Fellow Member of the Chartered Institute of Management Accountants of United Kingdom and also a Member of the Malaysian Institute of Accountants. He has considerable knowledge of the steel industry as he was formerly the Director of Operations for Perwaja Steel Sdn Bhd in Kemaman, prior to joining Maju Holdings Sdn Bhd as Group Executive Director in He was the Group Managing Director of Maju Holdings Sdn Bhd since 1993 until his resignation as Group Managing Director and Director in November Dato Abu Talib is also the Deputy Chairman of Ipmuda Berhad Muammar Gadaffi bin Abu Talib Muammar Gadaffi, a Malaysian, aged 38, is the Group Business Development Director of PFCE and was appointed to the Board of Directors of PFCE on 5 March He graduated from the University of Colorado with a Bachelor of Science in Operations Management in From January 2003 to December 2004, he was attached to PFCE as a marketing executive, responsible for the overall planning and analysis of the daily marketing activities of the oil and gas industries of PFCE, both local and overseas. In 2005, he assumed the role of Project Leader of the newly set up Flame Spray Division of PFCE where he was responsible for the business plan of the division. While heading this new division, he also continued to supervise all marketing related activities of the PFCE Group. Muammar Gadaffi was later promoted to Group Business Development Director in 2006 and was involved in the planning, coordination and execution of marketing efforts for all business units within the PFCE Group. In addition, he was also involved in the evaluation of overseas expansions and ventures, customer relationship management, sourcing for new products and establishing new partnership arrangements by PFCE Group. He is the son of Dato Abu Talib. 2

3 3. SALIENT TERMS OF THE SSA The salient terms of the SSA include, amongst others, the following: 3.1 Agreement to sell and purchase The Vendors agree to sell and BHB agrees to purchase the Sale Shares free from all encumbrances including BHB s right to nominate any party to hold/own the Sale Shares, for the Purchase Consideration, upon terms and subject to the conditions contained in the SSA. 3.2 Payment of Purchase Consideration The Purchase Consideration is payable as follows: upon execution of the SSA, the first payment comprising RM15,873,103 is to be deposited into a stakeholder s account; and on the business day falling immediately after the expiry of 7 business days following the fulfillment of all the conditions precedent (as set out in Section 3.3 of this announcement) ( Completion Date ), the second payment comprising RM4,126,897 shall be paid directly to the Vendors. 3.3 Conditions precedent The SSA shall be subject to the fulfillment of the following conditions precedent ( Conditions Precedent ): satisfactory results of due diligence investigations to be carried out by BHB during the period of 3 months commencing from the date of the SSA ( Grace Period ); as required, the approval(s) and/or consent(s) by the Vendors and PFCE s financiers including pertaining to any specific covenants given by the Vendors under the SSA; (iii) the delivery by the Vendors of the audited accounts of PFCE for the financial year ended 31 December 2013; (iv) (v) (vi) (vii) if required, approvals from the relevant licensing regulatory authorities including if applicable, from Petroliam Nasional Berhad ( PETRONAS ); if required, approvals from PFCE s major customers and suppliers; if required, approvals from any other party or parties; and the execution by both parties of a shareholders agreement and a call option agreement. 3.4 Profit guarantee The Vendors jointly and severally undertake and guarantee with BHB that the audited consolidated profit before tax ( PBT ) of PFCE for the financial year ending 31 December 2015 and the financial year ending 31 December 2016 will be not less than RM20,000,000 or the amount equivalent to the final Purchase Consideration, whichever is lower, for the relevant financial years. 3

4 For the purposes of determining whether the above profit guarantee has been met for the financial year ending 31 December 2015 and 31 December 2016, any impairment or write off for any uncollected receivables or debt owing to PFCE during the relevant financial year will be added back to the audited consolidated PBT of PFCE for the relevant financial year. Further, the Vendors guarantee for the financial year ended 31 December 2013 and the financial year ending 31 December 2014, that the audited company level and consolidated net tangible assets ( NTA ) of PFCE must at least be positive and must further meet all licensing requirements (including from PETRONAS). In the event there is any impairment or write off for any uncollected receivables or debt owing to PFCE in respect of the financial year ending 31 December 2014, the NTA shall not be less or worse off than negative RM10 million. 3.5 Call option (iii) BHB will grant to the Vendors a call option to be exercisable by the Vendors at any time from the Completion Date to 30 June 2017, for the Vendors to buy back in cash at the Option Price (as defined below) from BHB up to a maximum of 10% of the paid-up ordinary shares of PFCE ( Call Option ). The Option Price per share for the paid-up ordinary shares under the Call Option will be based on the transacted price per share pursuant to the Acquisition. The terms and conditions applicable to the Call Option will be provided under a separate call option agreement. 3.6 Pre-emption right Both parties have a first right of refusal to purchase the other party s shares/equity in PFCE if the other intends to sell its shares/equity in PFCE. 3.7 Operational funding After the Completion Date and subject to agreement by both parties during the Grace Period, BHB will procure funding in the amount of up to RM35,000,000 by way of loans/advances to PFCE to enable PFCE to meet its short term capital/funding requirements. 3.8 Joint Interim Management Committee A Joint Interim Management Committee will be set up immediately or as soon as practicable following the date of execution of the SSA, comprising 4 representatives from BHB and 3 representatives from the Vendors, with the Chairman being a representative of BHB. The purpose of the Joint Interim Management Committee is to ensure that there will be no disruption to the current operations of PFCE during the Grace Period prior to the Completion Date. 3.9 Vendors warranties and undertakings The SSA provides specific warranties and undertakings to be given by the Vendors to BHB comprising pre-completion warranties and undertakings and post-completion warranties and undertakings. The warranties and undertakings given by the Vendors to BHB under the SSA shall continue to have full force and effect up to the period of 2 years from the date of the SSA. 4

5 3.10 Termination Any material breaches by either of the parties if not remedied within an agreed period will give the innocent party the right to terminate. The SSA provides for payment (by the Vendors) and forfeiture (from BHB) of an amount equivalent to 10% of the Purchase Consideration as agreed liquidated damages. 4. RATIONALE FOR THE ACQUISITION The Acquisition forms part of BHB Group s strategy to continue exploring growth opportunities with a view to realising and driving our potential and to add value to the Group s diverse stable of businesses. The Acquisition will allow BHB Group to expand our investment in the oil and gas ( O&G ) sector which is in-line with our strategic plan to further expand into this sector. PFCE will provide synergy to BHB Group s current capabilities in the O&G sector via PFCE s pool of talent, knowhow and existing customer and supplier network. 5. RISK FACTORS IN RELATION TO THE ACQUISITION The Acquisition will not materially change the risk profiles of BHB Group s businesses as we will continue to be exposed to similar business, operational, financial and investment risks inherent in the O&G sector. These risks include but are not limited to the following: (iii) operational risks such as fire-breakouts and accidents, timely commencement and completion of contractual obligations; general business risks such as rising operating costs, dependency on major customers and skilled workers, rapid changes in O&G technology and customer requirements; and political, economic as well as regulatory conditions in Malaysia in relation to the O&G sector where any failure to comply may result in, amongst others, the cancellation of existing and future contracts, failure to win contracts and/or revocation of licences. Furthermore, compliance with any relevant new laws and regulations may entail significant expenses, including changes in operating procedures. Although our Group will continuously take appropriate measures to mitigate such risks, no assurance can be given that any change to these factors will not have a material adverse impact on our Group. 5

6 6. EFFECTS OF THE ACQUISITION 6.1 Issued and paid-up share capital and substantial shareholders shareholdings The Acquisition will not have any effect on the issued and paid-up share capital and the substantial shareholders shareholdings of BHB as the Acquisition will not involve any issuance of new Shares of BHB. 6.2 Net assets and gearing Based on the audited consolidated financial statements of BHB for the financial year ended 31 December 2013 and the unaudited consolidated management accounts of PFCE for the financial year ended 31 December 2013, and on the assumption that the Acquisition had been effected on that date, the proforma effects of the Acquisition on the net assets and gearing of the BHB Group are as follows: not expected to have any material effect on the net assets of the BHB Group; and expected to increase the gearing ratio of the BHB Group from 1.12 times to 1.15 times arising from the consolidation of PFCE s borrowings. 6.3 Earnings and earnings per Share ( EPS ) As the Acquisition is expected to be completed in the 4 th quarter of 2014, it is not expected to have any material effect on the earnings and EPS of the BHB Group for the financial year ending 31 December APPROVALS REQUIRED FOR THE ACQUISITION The Acquisition is not subject to the approval of the shareholders of BHB. The Acquisition is not conditional upon any other corporate exercises being undertaken by BHB. 8. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS AND PERSONS CONNECTED TO THEM None of the Directors and/or major shareholders of BHB and/or persons connected to them, have any interest, direct or indirect, in the Acquisition. 9. STATEMENT BY THE DIRECTORS The Board, after having considered all aspects of the Acquisition, is of the opinion that the Acquisition is in the best interest of the Company. 6

7 10. HIGHEST PERCENTAGE RATIO APPLICABLE This announcement is being made pursuant to paragraph 9.19(23) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ("Listing Requirements") as the acquisition of PFCE Shares would result in: PFCE becoming a subsidiary of BHB; and the subsidiaries of PFCE as set out in Section 1, Appendix I of this announcement becoming indirect subsidiaries of BHB. The highest percentage ratio pursuant to paragraph 10.02(g) of the Listing Requirements resulting from the Acquisition is 2.52%. 11. DOCUMENT FOR INSPECTION A copy of the SSA will be made available for inspection at the registered office of BHB during normal office hours from Mondays to Fridays (except public holidays) at 28 th Floor, Menara Boustead, 69 Jalan Raja Chulan, Kuala Lumpur, Malaysia for a period of 3 months from the date of this announcement. This announcement is dated 6 August

8 APPENDIX I INFORMATION ON PFCE 1. SUBSIDIARIES The subsidiaries of PFCE as at the date of this announcement are as follows: Name of Company % equity Principal activity interest held Subsidiaries PFCE-CG Sdn Bhd Supply and installation of electrical, mechanical instrumentation and firefighting systems PFCE Dagang Sdn Bhd Trading in petroleum, petrochemical products, industrial parts and hardware, steel products and building materials PFCE Seagull Safety Sdn Bhd PFCE Ocean Engineering Sdn Bhd Dormant Providing marine engineering services PFCE-Ponterosso Sdn Bhd (1) Provision of maintenance services for valve and supply of valve PM Solutions Sdn Bhd Providing fabrication works and related services PFCE Selatan Sdn Bhd Providing fabrication works, foundry castor, trading and plant maintenance Precise Calibration Sdn Providing calibration services Bhd (2) PFCE Central Sdn Bhd Providing fabrication works, foundry castor, trading and plant maintenance PFCE International Sdn Bhd Investment holding PT PFCE Indonesia (3) Providing engineering, construction and commissioning services Note: (1) An agreement dated 20 December 2013 has been entered into for the disposal of PFCE- Ponterosso Sdn Bhd. As at the date of this announcement, the said disposal is pending completion. (2) Interest held through PFCE-CG Sdn Bhd. (3) Interest held through PFCE International Sdn Bhd. 8

9 APPENDIX I INFORMATION ON PFCE 2. BOARD OF DIRECTORS OF PFCE The directors of PFCE and their respective shareholdings as at the date of this announcement are as follows: Name of director / shareholder Nationality No. of Shares % shareholding in held in PFCE PFCE Dato' Abu Talib bin Mohamed Malaysian 8,000, % Muammar Gadaffi bin Abu Talib Malaysian 2,000, % Abdul Malek bin Omar Malaysian - - Azman bin Mohd Malaysian FINANCIAL POSITION OF PFCE Based on the unaudited consolidated management accounts of PFCE for the financial year ended 31 December 2013, the unaudited net assets of PFCE as at 31 December 2013 stood at RM2.12 million and the unaudited loss after taxation attributable to shareholders of PFCE for the financial year ended 31 December 2013 was RM million. 9